The most important thing I learned from a billionaire I worked with, that you need to know.
This topic has come up for me recently in a few different conversations. From a friend I was talking to who runs an Instagram marketing business, to another who owns a cookie shop in Massachusetts. This lesson keeps being important.
So, I’ve decided to put it here for you, so that I can share it with a everyone all at once.
Let me start you off with some background: in 2012, I moved to NYC when I was offered a job at Liquidnet. They were offering twice what I was making back in Massachusetts, so it seemed like an easy choice.
While there, I worked for Seth Merrin.
I was pretty starstruck by this. Here I was, just a kid from a small town in Massachusetts. I’d never met a millionaire before in my life, let alone a billionaire!
Of course, I didn’t meet him right away. It was several months of working at Liquidnet before I actually got to talk to Seth Merrin. It’s not that he was cut off from us — his office had big glass walls, after all. All of Liquidnet had a very transparent and open vibe. I just didn’t get the opportunity to talk to him right away.
After several months of work, though, I was part of a product launch. Seth wanted to talk to everyone who had been involved and congratulate them on the successful launch.
This was it, then. My chance to talk to a real billionaire.
As you might imagine, I was pretty nervous about it. I had no idea what I was going to say to this man! You don’t get a lot of opportunities like these, I figured. I needed to make sure that whatever I said, it was meaningful.
I had to make this count.
So, I decided that I was going to ask him about what he clearly knew very well. I was going to ask him for his advice in business. While I got the opportunity to speak to him for a while, one thing he said stands out above everything else:
The most profitable thing you can do is to sell more to your current customers.
That might seem underwhelming. After all, it’s common sense, right?
We all know that. Don’t we?
But we also know that common sense really isn’t all that common. There are big differences between knowing something, and knowing something.
At the time, I understood his advice in a cursory way at best. It wasn’t until years later that it really sunk into my head and started to mean something. For years I still had that mentality that “if you build it, they will come.”
The kind of mentality that caused my first company to fail.
That “if you build it, they will come” mentality? That will lead any business to failure.
Instead, you need to put deep thought into who your customer is. You need to have a strategy for selling them more once you’ve already brought them in, because those secondary sales are pure profit. On the first sale, you’re losing a chunk of it to your marketing costs.
Want an easy example to follow? Let’s take a look at McDonald’s.
Let’s keep this as simple as we can, and look at their $1 cheeseburger. We’ll estimate that they’re spending $0.83 on advertising per cheeseburger sold. I’m not wholly sure that’s the case, but it works for this example. So that’s 83 cents to get the customer to spend $1.
A whopping 17 cents in profit.
Not a whole lot, is it? Definitely not the kind of profit that you need in order to be as successful as McDonald’s. So how do they do it?
“You want fries with that?”
They don’t stop at just selling you a cheeseburger. They sell you fries and a drink. They sell you ice cream (If the machine is working, that is).
All of these extra things? Those sales are pure profit. The advertising money has already been made up by the sale of the burger. They aren’t spending more on advertising once you’re already in the door.
With fries and a drink, that one dollar sale, turns into a three dollar sale, bringing profit from 17 cents, and turning into two dollars and 17 cents. A nearly 11x profit compared to before.
All depending on how much extra stuff they can sell you.
That’s how you get the kind of success that a company like McDonald’s has.
You keep selling to people once they’ve already walked in your door.
Instead of spending money to get new people to notice you or buy access to email lists, you need to be prioritizing the access to the customers you already have. They’ve already signed up. They’ve already given you their email. They’ve already started to pay attention to you.
That means you need more than the burger. You need fries. You need soda. You need ice cream.
You need to keep monetizing the base that you already have.
Now, that might seem a bit harder to do with your product than it does with burgers. After all, people are always going to want and need more food. They might only need one of what you’re selling.
Still, the solution is easier than you might think. What you need be thinking is: “What problems are going to come with my new product that my customers are going to need solved?”
Let’s say you’re selling websites, for example. What is your customer going to need once they have a website?
They’re going to need traffic. So, instead of just selling the website, you need to sell your customers a way to get traffic, too. Then they’ll need measurements. They’ll need analytics. Optimizations. So on and so forth.
Every solution creates new problems, and new needs.
You should make sure that you’re the one to fill that need.
McDonald’s doesn’t just sell you a burger and trust that someone down the street is going to sell you a drink, after all. They sell the burger and the drink, because there is more money to be made that way.
You should be doing the same.
Ask yourself: who is your customer? What are they doing with the product you are selling them? What are they going to need once they have your product?
What can you do to better serve your customer, and in turn, monetize each customer you have more fully.
How do you go from product, to business?
The best thing you can do to grow your profit is sell to the customers you already have. That means you need to know who they are so that you can anticipate their needs.
Many people just focus on a single product instead of a whole plan. That is why they fail. I know this very well. It’s the reason my first company failed. I hadn’t fully learned this lesson.
You grow your business by selling the burger, the fries, and the drink. That is how companies like McDonald’s get as successful as they are. That is how people like Seth Merrin get as rich as they do.
More importantly, it’s how you can do it, too.